Medicare Advantage carriers will be on the hook for errors made in diagnostic coding reaching back to 2018 under a final rule the Centers for Medicare and Medicaid Services issued Monday.
The Medicare Risk Adjustment Data Validation, or RADV, regulation took five years to complete after its draft version published in 2018 and attracted vehement opposition from the health insurance industry.
“What we're doing here with the RADV final rule is to provide to the Medicare Advantage plans clarity. We're providing to them our long-term vision and approach to RADV audits and it will allow us to hold MA [organizations] accountable for receiving payments to which they are not entitled,” CMS Deputy Administrator and Center for Program Integrity Director Dara Corrigan told reporters during a briefing Monday.
CMS expects to recover $479 million from plan year 2018, and projects it will recoup $4.7 billion from 2023 to 2032.
In addition to planning clawbacks of money CMS determines shouldn't have been paid, the agency will stop applying a fee-for-service adjuster to its audit findings, which had been used to ensure payments under fee-for-service Medicare and Medicare Advantage were actuarially equivalent.
CMS’ approach to these audits will be significantly different than under the previous policy. Instead of reviewing samples of insurers’ claims to determine if they were correctly paid, the agency will extrapolate the error rates from those reviews and apply them to the whole plan. The proposed rule would have been retroactive to 2011, but CMS instead will limit its scope to 2018 onward.
Executives from Humana, CVS Health's Aetna and Centene expressed concerns about the proposed rule at the J.P. Morgan Healthcare Conference this month. Several companies have indicated they would sue CMS if the fee-for-service adjuster were not included in the final rule.
"It's hard to predict what will happen if there is litigation and we certainly would not want to start to speculate about litigation, but we believe we put together a rule that is not just balanced and measured and fair, but one that is ready for prime time," Health and Human Services Secretary Xavier Becerra said during the news conference.
AHIP, the largest health insurance trade association, slammed the final rule. “Our view remains unchanged: This rule is unlawful and fatally flawed, and it should have been withdrawn instead of finalized," AHIP President and CEO Matt Eyles said in a news release. "The rule will hurt seniors, reduce health equity and discriminate against those who need care the most. Further, the rule would raise prices for seniors and taxpayers, reduce benefits for those who choose MA and yield fewer plan options in the future."
The Alliance of Community Health Plans, which represents nonprofit health insurance companies, also rebuked the regulation. "This rule comes with enormous costs and fails to target the most egregious diagnosis coding violations,” President and CEO Ceci Connolly said in a statement. The policy could disrupt care for enrollees and does not address program integrity, according to the organization.
The Blue Cross Blue Shield Association offered similar critiques. "While we all can agree that improvements can be made, the failure to adjust for the legitimate differences between Medicare Advantage and original Medicare will have a detrimental effect on the seniors and people with disabilities who rely on the Medicare Advantage program," Senior Vice President of Policy and Advocacy David Merritt said in a news release Tuesday. "CMS should have implemented a narrower solution aimed at a few bad actors, but instead this overreaching regulation will raise costs, reduce choice and make it more difficult for seniors and those with disabilities to effectively manage their health."
CMS pays private Medicare carriers based on documented risk scores that reflect the health of their members. Regulators are concerned that this creates a financial incentive for insurers and providers to upcode and exaggerate patient conditions to generate additional reimbursements.
Medicare Advantage insurers generated an estimated $17 billion through overpayments last year, according to the Medicare Payment Advisory Commission, which makes policy recommendations to Congress.
Medicare Advantage carriers are under increasing pressure to own up to overpayments. In June, the Supreme Court declined to hear UnitedHealth Group’s challenge to a regulation that makes Medicare Advantage insurers liable for False Claims Act lawsuits when they fail to return overpayments.
CMS staked out a middle ground by not extending the extrapolation provisions further back than 2018, but eliminating the fee-for-service adjuster is likely to trigger lawsuits, said Lindsey Fetzer, an attorney at Bass, Berry & Sims who specializes in Medicare Advantage.
“In terms of immediate analysis of what financial impact looks like, it's better than some were hoping for, but I would still say the prospective impact of allowing for extrapolation will fundamentally change how plans may operate,” Fetzer said.
Correction: A previous version of this article misstated the time period for the Centers for Medicare and Medicaid Services projection of how much money the Medicare Risk Adjustment Data Validation regulation would return to the government.
